REPORTING SEASON: BC Iron Limited (BCI)
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Figure 1: BC Iron Ltd 12 month chart
BC Iron (BCI) annual earnings under pressure as iron ore prices slump
– BC Iron (BCI) posted a below consensus $158.5m annual loss for the 12 months ended 30 June. The result was held back most by clay-related operational challenges and a $170.8m impairment charge due to falling iron ore prices.
– Lower demand from the world’s biggest consumer of ore (China buys ~60% of global exports) and a ramp up in supply from major producers pushed prices 55% lower over FY15. The junior Pilbara based miner is a higher cost producer of the metal than the larger BHP Billiton (BHP), Rio Tinto (RIO) and Fortescue Metals (FMG), which has made conditions especially challenging. BCI averaged US$72/dmt for the year, compared to US$123/dmt in the prior year.
– BCI expanded its Pilbara asset portfolio by acquiring 100% of Iron Ore Holdings (IOH) in November 2014 off-market. The Perth based miner had a portfolio of projects in Central and Western Pilbara which BCI has integrated within its business.
– BCI holds a 75% interest in the Nullagine Iron Ore Joint Venture (NJV), with the rest held by Fortescue. BCI utilises FMG’s infrastructure. Clay-related issues in 1H15 interrupted operations, although production ramped up over 2H15. No dividend was declared (as expected). September 2014 was the last time the ore miner paid a dividend to shareholders.
– BCI shares are higher following the result, however have halved in value this calendar year and slumped by 89% in 2014. Looking ahead, BCI is targeting all-in cash costs of A$48-A$54 per wmt. The market price for ore is US$53.3/tonne in late August. BCI estimates EBITDA of A$5-A$14m for FY16.